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The purpose of this study is to analyze the performance of indigenous innovation in developing countries in the era of trade liberalization. It analyzes indigenous innovation from research and development (R&D) investments to innovation output and its effect on economic growth.

The sample for this study includes 20 middle-income countries across five continents for the period between 1994 and 2018. The study employs the Crepon Duguet and Mairessec CDM model in a panel data setting to do a multistage analysis of the innovation process. A vector error correction model VECM is employed to test for Granger causality between the variables investigated.

The results show that imports and foreign direct investments (FDI) have generally have short-run and long-run causal effects on domestic R&D investments. In regions where imports and FDI do not have individual causal effects on innovation output, a joint increase in each of them and R&D have both short-run and long-run causal effects. Indigenous innovation is a significant contributor to economic growth when a country can produce and export novel products.

The sample is only limited to developing economies, and due to the unavailability of data, only 20 countries were captured.

Imported products and FDI are critical to the innovation drive when such activities are targeted at enhancing indigenous innovation from R&D to the production of new products. Hence, policy formulation should encourage the absorption of foreign technologies that serve as inputs to indigenous innovation.

This paper focuses specifically on indigenous innovation and analyses the influence of foreign technologies in this effort. It tests the moderating roles of imports and FDI in the relationship between R&D and innovation output, concluding that both variables enhance the effect of R&D on innovation output.

The main purpose of this study is to examine the impact of imported inputs on firms' productivity in selected South Asian economies, namely Pakistan, India and Bangladesh. Furthermore, this study explores the complementarity between firms' capabilities and imported inputs in an augmented productivity framework.

A dataset comprising 7117 manufacturing firms of selected South Asian economies was taken from the World Bank for 2013 and 2014. The empirical analysis was based on stochastic frontier models, the ordinary least square method and instrumental variable estimation techniques.

The empirical results show that imported inputs have positive and significant effects on the firms' productivity in the selected countries. Moreover, the study findings demonstrate that firms' capabilities play a complementary role in expanding the firms' production frontier.

The study outcomes suggest that reducing tariffs on imported inputs will enhance the firms' productivity in the selected emerging economies. However, the study further finds that the potential gain of imported inputs is conditional on the firm's capabilities. It implies that firms operating in these countries can improve their performance by allocating more resources to capabilities, such as workers’ training, management and internal R&D effort.

The existing literature on the subject is sceptical about the positive impact of imported inputs on firms' productivity in the case of developing countries. In this regard, the shortage of skilled labour and firms' capabilities are compelling rationales that need to be explored. Thus, the potential contribution of the study lies in explaining the moderating role of firm's capabilities operating in the selected emerging economies in the nexus of imported inputs and productivity.